The US trade balance for May

Outlook

Today the news feed is a strange mix—the US trade balance for May, the NATO summit in Turkey, and SpaceX joining the Nasdaq. The press had had a field day describing the methods the anti-Musk cohort have been trying to avoid getting SpaceX in their own portfolios.

And as expected, the European NAYO members are talking about breath-taking increases in defense spending. To be fair, and it’s hard to be fair to this guy, it’s one thing Trump did accomplish—ending NATO reliance on US funding. That his methods alienated Europe for a generation or two is, however, a high price. And we are not alone in imagining he is still going after Greenland.

Back in the markets world, we see a battle between high inflation+ high yields+ hawkish Fed+ booming US economy vs. the capital flight generated by Trump and his very bad policies. As noted before, traders dislike incorporating politics into their outlooks but most of what Trump does and says is unprecedented, so he is unavoidable.

Evidence: a US player accidentally stepped on an opposition soccer player ankle and got a red card penalty, meaning he couldn’t play in the next round. Trump and his many lackeys went to work on the ruling organization and got the red card withdrawn. Then the US lost the next game, anyway. The NYT has this:  “… the trouncing of the U.S. team was painted as a sign of justice.”

Anti-Americanism is everywhere. But so is American dominance in a dozen places, especially tech (and tacky entertainment like that wedding in Madison Square Garden).

We sometimes see the anti-Trump/anti-American feelings spill over into FX, only to retreat when the pro-dollar factors poke their head up, especially that boomy economy. This is what we expect when those who sold the dollar on the seemingly bad payrolls report get a reality check. 

Today the expectation centers around the trade report failing to show a significant positive effect of tariffs, plus whatever rude, crude stuff Trump delivers at NATO.

Tidbit: A French court has ruled that LePen is not excluded from running for office over fraud charges. This is bad news in the sense that her party, plus others, are causing the fiscal crisis. As the second largest country in the eurozone, this offsets Germany’s seeming economic rebound and resilience. Plus, Trump is ticked off at Italy’s PM for being feisty (women should be obedient) and heaven only knows where that goes. 

Forecast

Payrolls are behind us and inflation is yet to come, leaving us with scraps of information to chew on. Today it looks like that is going to be another headache over the tech frenzy and whether it’s time for another fat dip to be followed by buying on the dip, as before. We do not see anyone except the fringe say this is the big one.

We are in that uncomfortable space of a big downtrend in the big currencies but some correction/consolidation that might turn into a significant move to the upside, even though it’s not likely at the moment. Trends actually reverse only on a big, meaningful news event that is paramount to a Shock. Warsh saying he favors a rate cut, for example—the probability of which is zero. It’s hard to imagine what it would be… So, we can buy the NZD, AUD and EUR, but with a finger on the sell button. The EM’s are doing well these days, and the inference is to get ready to dump.